ECON 105 Lecture 5Outline of Last Lecture I. Doctrine of Invisible Hand II. Limitations of Invisible HandIII. Crucial Ingredients for Exchangea. A. low transactions costsIV. DemandA. Law of DemandB. Demand CurveOutline of Current Lecture I. Movement vs Shift in a CurveA. Demand GraphsB. Supply GraphsC. FactorsII. Factors that Shift the Demand CurveA. SupplyB. Supply CurveIII. Factors Shifting the SupplyIV. Market EquilibriumA. GraphB. CharacteristicsCurrent LectureMovement vs Shift in a Curve These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute. $MovementSHIFT- When the price of the good changes there is a movement along the demand curve. We call it a change in quantity demanded.- When factors other than the price of thegood change, there is a SHIFT in thedemand curve. We call it a change in demand.Factors that Shift the Demand Curve- Prices or related goods- substitutes (coke & Pepsi)- complements (car & gasoline)- Consumer Income- normal goods (positive relationship between income and consumption)*move in the same direction- inferior goods- Consumer preferences - unfavorable demand shifts LEFT- favorable demand shifts RIGHT- Number of Buyers- negative (demand)- buyers expectations (negative relationship)QDemand CurvesSupply CurvesMovementShiftWe call it a change in demand NOT a change in quantity demanded!Supply: the quantity supplied of a good of service is the amount of the good or service offered for sale at a given price holding all other factors constantSupply Curve: of a particular good or service shows the various quantities supplied at different prices holding all other factors constant (supply curve is GENERALLY positively sloped)Factors Shifting the Supply (from sellers’ perspective)- Price of other goods: Already making or potentially could make- Price relevant resources: which goes into the productions- Technology- Sellers expectations- Number of SellersMarket Equilibrium Market Equilibrium: is at the intersection of demand and supply- Gives equilibrium price and quantity- Is that price at which the quantity demanded of a good equals its quantity suppliedCharacteristics of Market Equilibrium- Quantity demanded= quantity supplied- No shortage or surplus – the market clears- Equilibrium Price is stable – no tendency to rise or